The way we practice philanthropy today does not work to solve societal problems on a national scale. Strategic philanthropy – the idea that funders can identify, implement and scale up innovative solutions to society’s urgent challenges – is built on a flawed foundation. Sometimes, it can even do more harm than good.
This statement is powerful stuff. And it’s no wonder it caused a stir when the message was presented in the Stanford Social Innovation Review earlier this summer. Especially because one of the article’s two authors is Mark Kramer, a longtime advocate for maximizing the efficiency of philanthropy.
“We’ve received quite a few reactions, mostly positive,” says Mark Kramer when Impact Insider catches him over an unstable video connection.
“But we’ve also heard from directors of large foundations who have said, ‘Look, I can’t argue against your analysis, but I can’t just shut down my organization.’”
The way forward is not straightforward either. If Mark Kramer and his co-author, Steve Phillips, are right, philanthropists around the world are facing an existential crisis. They must slam on the brakes and radically change their approach to social change – before they waste more money or, in the worst-case scenario, cause harm to our society.
“We need a new approach and I don’t think anyone yet knows exactly what to do,” says Mark Kramer.
Two Philanthropic Luddites
Let’s delve into the argument.
But first, it’s appropriate to introduce the two heretics who are pulling the rug out from under philanthropy as we know it today.
Mark Kramer sits on the board of three family foundations. He is a senior fellow at the Harvard Kennedy School and a former senior lecturer at the Harvard Business School.
Together with his colleague Michael Porter, he founded the international consulting firm FSG in 2000, which helps, among others, foundations and NGOs develop solutions to complex social problems. Mark Kramer has played a key role in the development and dissemination of creating shared value and collective impact – two highly influential movements in philanthropy and corporate social responsibility.
Mark Kramer’s co-author is Steve Phillips, who is behind the bestsellers “Brown Is the New White” and “How We Win the Civil War”. He is also a regular columnist for The Nation and The Guardian.
As a philanthropist, he founded the think tank Democracy in Color and was involved in the creation of the investigative American media outlet ProPublica.
In other words, the two philanthropic Luddites are not novices. They have both spent decades of their lives trying to change society with philanthropic methods before they now finally break with strategic philanthropy.
Philanthropy is Astonishingly Ineffective
So what are they saying?
“Philanthropy is a wonderful means to fund museums, cultural houses, universities and hospitals. And it can to some extent support local programs and strengthen local communities,” says Mark Kramer:
“But as a means to create a better society at scale, philanthropy has proven to be astonishingly ineffective,” he and Steve Phillips write in the article.
We cannot rely on foundations funding initiatives driven by social organizations. It will never be able to deliver solutions on a sufficiently large scale.
“We must accept the painful truth that the philanthropic model we rely on has not and cannot deliver the improvements to society that we so desperately need,” they write.
Does that mean, I ask Mark Kramer, that many people working in the philanthropic sector are fooling themselves?
“Yes,” he says:
“I hadn’t thought to put it that way. But yes, I believe many of them are.”
The State is Always Strongest
The problem, Mark Kramer explains, is fundamentally that philanthropic power will never match the brute strength of a nation-state.
The state will always be able to do more good than the entire philanthropic sector combined, just as it is capable of doing more harm than philanthropy can ever compensate for.
For example, in the 1960s, President Lyndon B. Johnson declared a war on poverty and managed to halve poverty in the U.S. in less than a decade.
Similarly, successive U.S. governments have deliberately neglected to ensure an adequate livelihood for people unable to work or, for those who can, require companies to pay a living wage.
“The impact of these choices cannot be offset by nonprofit programs,” write Mark Kramer and Steve Phillips.
Philanthropy Cannot Create Sustainable Societies
In the Stanford Social Innovation Review, the authors back up their claims with an analysis of the development of U.S. philanthropic grants over the past 40 years compared to the development of a range of social issues.
In 1980, American philanthropy amounted to $55 billion. By 2022, grants had multiplied to $485 billion – about a third of which went directly to addressing social problems.
In the same period, there has been no progress in poverty reduction, while homelessness has worsened dramatically. The income inequality between races has gradually increased over the years, and child mortality has risen – worst for children of Black women.
One could argue that things would have been worse without philanthropy helping millions of people. But for the authors, this instead serves as proof of philanthropy’s inadequacy.
For although the U.S. surpasses all other countries in the world in philanthropic grants per capita, the country has quietly slipped down the OECD’s social well-being index – in contrast to the Scandinavian welfare states.
“Philanthropy can do a lot of good. But the fundamental goal of creating a fair and sustainable society cannot be achieved through philanthropy,” says Mark Kramer.
But, I object, you’ve looked at American data. Can you really say that your conclusions apply to philanthropy worldwide?
“Yes, I definitely would,” says Mark Kramer, apologizing for the article’s focus on American conditions, but pointing to a twenty-country analysis that shows an inverse relationship between philanthropic giving and social progress.
“I was simply unable to get equally good data for other countries in the world. And of course, there are political and racial issues that are unique to the U.S. But the overall conclusion about the impact of strategic philanthropy holds,” he says.
Carnegie’s Philanthropic Original Sin
The philanthropic inadequacy stems from a slip in the recipe for the philanthropic primordial soup, argue Mark Kramer and Steve Phillips.
In 1889, the North American Review published the article “Gospel of Wealth” by the Scottish-American industrial magnate Andrew Carnegie.
In the text, widely regarded as the blueprint for modern philanthropy, Carnegie described how the wealthy have a responsibility to use their fortunes for the benefit of society.
It was, Carnegie argued, important that the wealthy themselves lead this societal development.
“Wealth passing through the hands of the few can be made a much more potent force for the elevation of our race than if distributed in small sums to the people themselves,” he wrote, elaborating:
“The man of wealth [must become] … agent for his poorer brethren, bringing to their service his superior wisdom, experience, and ability to administer, doing for them better than they would or could do for themselves.”
With these words, Carnegie laid the foundation for the problems built into philanthropy today, believes Mark Kramer.
“He concluded that poor people are not capable of using money wisely, and that recipients of philanthropic funds are not able to solve their own problems. And that has shaped the philanthropic sector we see today,” he says:
“But Carnegie was wrong, and I think we must accept that he is not a good guide for philanthropy today.”
The Poor are Rational
There is no evidence that a successful businessman is also a successful philanthropist, argues Mark Kramer.
The ability to excel in one field does not necessarily transfer to another. Einstein was no good painter, and Picasso could not do math. And Carnegie himself would hardly have sought Mahatma Gandhi’s advice on running a business, he and Steve Phillips write in the article.
Conversely, there is overwhelming evidence that poor people make wise choices when given money directly.
“In the U.S. alone, there are more than 100 experiments either giving people cash or ensuring workers a living wage,” says Mark Kramer, continuing:
“All studies show that if you give people money, they use it wisely. They don’t spend it on drugs and alcohol. They spend it on clothes, medicine, education, better food for their children, and paying off debt.”
The same conclusion is reached by GiveDirectly. Since 2008, the organization has distributed $580 million to 1.4 million people. And with few exceptions, they have used the money wisely.
In Mark Kramer’s summary, the picture looks like this:
“Carnegie’s belief that the wealthy are wise because of their wealth and that the poor are ignorant because of their poverty laid the foundation for a paternalistic approach to philanthropy that still exists today. In that light, it’s no wonder that philanthropy’s results are as disappointing as they are.”
The Harmful Effects of Philanthropy
And now, when it almost can’t get worse, Mark Kramer doubles down: Philanthropy can at worst be harmful and counteract the goal of a sustainable society.
In two ways, philanthropy poses a potential societal threat, he argues.
“The first is that philanthropy pretends to offer solutions that don’t require fundamental changes to the existing wealth and power,” says Mark Kramer:
“Even when we talk about systemic change, it’s usually not on a level that in any way threatens the wealth and privileges donors themselves have. In my view, that’s the level of systemic change we should strive for. And philanthropy struggles with that.”
The second problem, which is related to the first, is that philanthropy’s focus on working almost exclusively through the nonprofit sector takes the pressure off of changing business and government – the only sectors that actually have the scale and resources to fix our problems, saying, ‘No, no, everything is fine as long as we work with the nonprofit sector to solve the problems’,” says Mark Kramer.
There Are Two Ways Forward
So is philanthropy definitively doomed? No, not necessarily, believes Mark Kramer. But fundamental change is needed.
He sees two immediate paths for foundations to take.
The first is to recognize the monumental importance of the state and consequently focus their efforts on influencing political processes, engaging voters and, to the extent permitted by law, to influence government policy.
Similarly, foundations can use their resources to steer businesses towards a more just and sustainable direction.
The second path is more demanding.
It involves cutting the umbilical cord to the organizations that are currently their preferred partners and directly helping individual citizens find their own solutions.
Mark Kramer calls this empowerment philanthropy – a concept that is by no means set in stone yet.
“I wish I could be more explicit about a framework for this idea of empowerment philanthropy, but to be honest, I’m not there yet,” he says:
“I believe we could construct a framework that helps donors understand when they can increase people’s sense of personal agency. But I think we have to learn our way into it.”
That learning process requires money, and if someone is willing to provide funding, he is ready to get involved.
“It will require finding the examples on which to build a model of empowerment philanthropy, and that I can’t do on my own. But I’m certainly interested in developing that framework if it’s possible,” says Mark Kramer.
The interview is nearing its end. And there is a question I simply must get answered.
The article in the Stanford Social Innovation Review can’t have been easy to write. For you had to say that some of the things you yourself have believed in and promoted were wrong?
“My son once told me that one of the things he likes about me is that I never mind discovering that I was wrong because it means I’ve learned something new,” says Mark Kramer, continuing:
“I don’t mind being wrong, and I was wrong. I went down this path and dedicated over 20 years of my life to it because I believed in the obvious idea that if you want to make society better, you work through philanthropy in the nonprofit sector. Today my conclusion is that it was wrong. Philanthropy can do a lot of good, but we can never fix our society through philanthropy alone.”
